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Bottoms Up and the Bottom Line

By The New York Times and Eric Asimov December 4, 2006 1:12 pmDecember 4, 2006 1:12 pm

The Orchard has finally begun serving alcohol.
(Alex di Suvero for The New York Times)

The other day I put a call into John LaFemina, the chef and owner of The Orchard, because I wanted to talk to someone with experience in opening restaurants that weren’t huge news-making deals, but also weren’t forgettable throwaways, about the rhythms of crowds over a restaurant’s first year.

But we got off that topic — to which I’ll return in a bit — and onto another. After about a year in business, The Orchard, he informed me, had finally begun serving alcohol. And his joy over that, along with some of the details he provided about sales at the restaurant since that development, provided an interesting reminder of just how important alcohol can be to a restaurant’s bottom line.

You may recall that the Orchard opened in late November of last year without a liquor license and was engaged in a battle with the community board that covers its Lower East Side area. This is the same community board that covers the area of the East Village in which the E.U. is located, the same board that kept the E.U. license-less for a good long while. The board has expressed concern about foot traffic and noise in these neighborhoods, and trying to block establishments from acquiring licenses has been a key part of its attempts to render the neighborhoods more tranquil at night.

Since the Orchard’s opening, many of its regular customers had understandably grown accustomed to, and fond of, the fact that they could tote their own bottles of wine into the restaurant and have them opened and served for no fee.

Many restaurants with wine lists charge fees of $20 or $25 or more to diners who want to bring and drink their own wine. The ability to escape such a fee at the Orchard meant that if you didn’t mind the planning and the hauling, you could drink wine there for the bottle’s retail price, which is well below a restaurant mark-up. As a result, the overall cost of your meal, including what you paid for the wine, would be substantially less than at a comparable restaurant.

Mr. LaFemina said that his restaurant had in fact become popular with wine merchants staging tastings for clients over dinner at the Orchard.
As my colleague Florence Fabricant reported, the state finally approved a license for the restaurant in August. But Mr. LaFemina said that it took until mid-November to get the license into the restaurant and be authorized and ready to serve alcohol.

Was he worried that the change in the Orchard’s fate and policy — now, if you bring your own wine as opposed to ordering from his list, you incur a $20 charge — would cause it to lose business, given how accustomed many diners had become to the old way?

Not at all, he said, adding that his revenues are already way, way up.

In the weeks since he got his license, he said, the amount of money the restaurant takes in has almost doubled, he said. On a busy Saturday night, he’ll now do $12,000 in gross sales; he used to do $6,000, he said.

“The first night we had a liquor license, an investment banker from Wall Street ordered a $300 bottle of Amarone,” he said. “That made my per-head average go through the roof. Who cares about a $20 plate of pasta when you can make $300 on a bottle of Amarone?”

His per-customer average, he said, has risen to about $65 from about $35.

He quickly clarified that his profit on the Amarone obviously wasn’t the full $300; it was more like $150, once he subtracted what he paid for the wine. Mark-ups of 200 percent or more are standard.

“Everyone was saying, ‘Aren’t you afraid people won’t come, because they’re used to a bargain?’ No. New Yorkers want service.”

He added: “Anybody who waits at the bar orders a $10 drink.” These diners don’t sip tap water while their tables are being set.

I asked him what his legal fees were during the course of the fight for the license. “My lawyer was good to me,” he said. “About $8,600. But I also worked a deal with him: $1,000 in free meals. A $1,000 credit.”

He said his lawyer had just begun taking advantage of that credit and “used $300 the first night.” How? “He ordered a nice bottle of wine!”

On the subject of crowd rhythms, which was why I had called, I told him that I’m regularly struck by the fact that so many new restaurants (and every month there are many, many new restaurants) are jammed from the get-go, their tables packed night after night and week after week, even though they’ve not been around long enough to create loyal customers or get reviews.

I see all these people and wonder how they know about a place so early and get there so quickly. And I wonder why so many restaurants struggle, as we all know they do, when it can look so easy and automatic at the start.

In recent years Mr. LaFemina has opened Peasant, Apizz and, lastly, the Orchard. What has he learned from those restaurants?

“Everybody wants to go to a new place,” he said. New Yorkers want to be the first to have opinions about, and experiences at, the latest place to open, the place their acquaintances haven’t managed to visit, especially if it’s been mentioned prominently in a few publications.

So the first months, he said, are the cakewalk. After about five months, he said, it gets harder, and without doubt, he said, the most challenging, predictive months of a restaurant’s initial year are the 11th and 12th ones. If a restaurant can remain packed then, it may well hang around for a significant while.

But being packed at the start, while a good thing, isn’t something with a whole lot of meaning for the long haul.

Good luck to Mr. LaFemina, and kudos for pricing his wines fairly! Selling a bottle that costs $150 for $300 is rare in the restaurant business… but that’s just what we did at Windows on the World when I was there, and we sold more wine than any other restaurant in the nation! Far too many restaurauteurs treat the winelist like it’s a big pair of shears meant to fleece the customer. My experience has been that a fairly priced, well chosen list sells more bottles, brings in more money over the long run and gets you a better reputation at the same time.

Kudos to Chef LaFemina for sticking by his guns and for providing wine lovers and wine professionals a fair deal at his restaurant, all the while suffering huge profit losses as a result of licensing issues…

It will no doubt serve him well in years to come… Have you ever really heard anyone slag a restaurant for being wine friendly?

Let’s see…

Open a year… possibly six days a week.. let’s say 25 bottles consumed at his establishment a night (probably low)…

As a wine retailer and the owner of a wine bar, restaurant, cheese and butcher shop in Northern Florida (we do anything we can to keep our doors open,)in a predominately seasonal area with much competition for the wine dollar, new establishmentts open left and right, it seems the same all over…

I will second Mr. Lafemina’s assertion that the first part is easy, everyone likes something new, it is the second year that really determines your success or failure…

Anyone can coast on immediate success, but how you follow it up and remain creative and progressive with your food and wine programs is the key to longevity…

We have never charged a corkage fee and allow customers to pick wines straight from the shelves to enjoy with their food… isn’t that what it’s all about?

I understand how some people want service, but I like the have-it-your-way of hauling bottles and saving money. That’s why I thought A.O.C. Bedford was such an outstanding place when I ate there. You can do either: BYO it or wine list it.

And on Monday nights, there’s zero corkage fee like Orchard used to have. The Monday night deal is brilliant — if you’re going to be open that night of the week, you might as well maximize your crowd. This tiny restaurant was packed full the Monday I went — not the per-head average of the other nights perhaps, but certainly one of the more profitable Mondays around I should think.

I just wanted to point out that the Community Board covering the establishments Frank talks about has dropped the hammer on several restauranteurs with established reputations and transparent behavior (such as the two behind The Orchard and The EU) but has somehow let one of the East Village’s most notorious contributors to nighttime chaos not only open a second establishment but also obtain a liquor license in a less than forthright manner.

i can’t stand paying 200% more for a bottle of wine – i invariably order a lesser wine than i enjoy drinking (unless i spend $200). So normally i cook myself and friends meals at home and drink awesome 25.00 – 50.00 bottles of wine.
the only problem is the dishwashing – maybe i can solve that the same way restaurants have…..illegal labor. almost every ny restaurant is run by a cheap, shallow socialite, robbing you with wine and liquor, making gimmicky food with cheap illegal staff, praying for a write -up…hooked on blow. buy for as little as possible…sell for as much as possible…..thats a real skill right? if you find a restaurant that doesn’t operate that way devote yourself to it. i think the only thing you’ll find is a hippie juice bar in the village. it a real bummer…….death to the restaurant!

I’d love to see a follow-up on the Orchard in November 2007 (and even 2008), because after the initial buzz has finally died down for good, I’d be willing to bet that they won’t be doing too many $12K Saturdays. It is at that stage of the business cycle where a solid guarantee of a $6K gross makes for a nice cushion. I’ve always said that over the long haul, it made much more sense for a restaurant like the Orchard to remain BYO, even if its near-horizon prospects are so good for LaFemina’s bottom line. Perhaps even a well-publicized return to the no corkage rule in ’07 or ’08 would achieve the same end, once the more profligate diners start eating elsewhere.